Davis Polk partner Michael Hong was quoted in Private Equity Law Report on steps funds can take to prepare for a potential recession. “When it involves flexibility to ensure a GP is poised to defend the fund’s portfolio and deploy capital, LPs are often accommodating within reason,” he explained. “That does not necessarily extend, however, to approving actions unrelated to the economic climate, such as transactions that are plainly for the benefit of the GP without an obvious benefit to the LPs.”

Michael noted that fund managers should resort to similar communications strategies that they developed during the coronavirus pandemic. “People wanted information quickly, and they wanted to be able to digest it quickly. Creative investor relations professionals found new, pithy ways of communicating the health of the portfolio,” he said, suggesting regular town halls, frequent periodic updates, audio-visual media and maintaining an ongoing dialogue as some useful communication techniques.

“PE in a Recession: Fortify Existing Funds in Accordance With Fund Terms, Obtain Liquidity and Manage Skittish Investors (Part Two of Three),” Private Equity Law Report (September 27, 2022) (subscription required)

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